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Goldman Sachs raises S&P 500 year-end target amidst optimistic earnings outlook


Goldman Sachs raises S&P 500 year-end target

Goldman Sachs, a prominent financial institution, has recently adjusted its year-end target for the benchmark S&P 500 index, setting it at 5,200. This upward revision represents an approximate 4% increase from the index's current levels. The rationale behind this adjustment lies in Goldman Sachs' revised outlook on earnings for the companies comprising the S&P 500.


Previously, Goldman Sachs had projected the S&P 500 to reach 5,100 by the conclusion of 2024. However, the brokerage firm has since revised its forecast upwards, citing a shift from their earlier projection of 4,700 in December as we read in Reuters.


This adjustment is influenced by various factors, including a moderation in inflationary pressures and expectations of rate cuts by the U.S. central bank over the course of the year.


In its latest forecast, Goldman Sachs anticipates an 8% increase in profits for companies listed on the S&P 500 during the current year.



This optimistic projection is underpinned by an improved economic outlook in the United States, coupled with stronger profit margins observed among mega-cap corporations.


David Kostin, who serves as the lead strategist at Goldman Sachs, provided insight into the factors driving this positive outlook. He noted, "We expect strong world GDP growth and a slightly weaker dollar will support EPS, while lower rates and lower oil prices will be a slight drag."


This indicates Goldman Sachs' belief that global economic expansion, alongside currency dynamics and changes in interest rates and energy prices, will play crucial roles in shaping corporate earnings.


Kostin further elaborated on the expected contribution of mega-cap stocks, particularly those categorized as the "Magnificent 7," to the overall profitability of the S&P 500 in 2024. He highlighted the significance of advancements in artificial intelligence and robust consumer demand in driving revenue growth, while also facilitating margin expansion among these key players in the market.



In terms of sector performance, Kostin predicts that the Magnificent 7 stocks will outperform other sectors within the S&P 500 in terms of earnings growth. This underscores the importance of these select companies in driving overall market performance and investor sentiment.


Regarding the broader index, Kostin expects an improvement in operating margins across various sectors, albeit to a lesser degree compared to the Magnificent 7. This more modest enhancement is attributed to factors such as moderated input costs, including wage growth, coupled with robust sales expansion and only marginal price disinflation.


19.02.2024



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